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Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will begin on silent hold. If you'd like to ask a question, press star, one.

MODERATOR: Good afternoon, we’ll follow the standard format for today's briefing, Admiral Allen will give the daily update. We'll take a few questions here from the floor and then from the phone.

Admiral?

ADMIRAL ALLEN: Thank you. Good afternoon. Just an update on a few numbers that we track on a daily basis. The production capacity that went to midnight last night resulted in us producing 22,735 barrels. That was 7,946 off the Q4000 remainder off the Discoverer Enterprise.

The relief wells continue to go at pace. The Development Driller III, which is the primary relief well, is now at 10,968 feet below the mud line. Development Driller II is 4,697 feet below the mud line.

In regards to Development Driller III, there are two points to be made there. They are starting what they call “ranging activity.” This is where they withdraw the drill pipe and put down an electrical cable into the end of the wellbore, and they put out an electrical signal, and they actually could pick up the magnetic field around the wellbore. This tells them how close they are getting.

They have made contact with this electromagnetic field. What they will do is continue to drill down in short intervals, withdraw the pipe, put that sensing device down, and slowly close on the wellbore to the point where they're ready to do the intercept drilling.

This last part takes some time, because they only do several hundred feet at a time, withdraw the drill pipe, and then put the sensor down to figure out how close they're coming. After a series of these readings, they can have a very precise idea of how close they are to the wellbore and then how to actually turn the drill in and make the intercept. But then we'll get much slower, because they have to basically drill, withdraw the drill pipe and put the sensor down.

They also have a vessel standing by that's full of mud on the top, in the event they get really close, they could potentially knick the wellbore they could actually put mud down to control any hydrocarbons that might come out.

Regarding the longer-term containment, we should by next week have the additional vessel in place to start producing off of the kill line. That's the other line that's available to bring oil to the surface. That will bring us the three production vessels and the 53,000-barrel capacity we were looking for by the end of June.

Moving beyond that, we're very close to completing the first free standing riser pipe that will allow us to go to the new mooring configuration, and ultimately that will allow us to actually be producing from four different platforms by mid-July, increasing our rate from 60,000 to 80,000 barrels.

In addition, we had our visit with Florida regarding claims processing. Tracy Wareing's group was down there meeting with them, and they are assisting the state of Florida and facilitating their claims processing. And as of this date, BP has gone over $125 million in claims that have been paid.

A couple of travel announcements. Secretary Napolitano and Assistant Secretary to the President for Energy and Climate Change Carol Browner are returning to the Gulf next week to continue their inspection and oversight of the response. I will be down there and participate in meetings with them.

Then on Tuesday, the Vice President will be traveling to the region to assess efforts to counter the oil spill. They will visit our unified area command in New Orleans and also visit the Florida Panhandle. And, again, I'll be joining the vice president on that trip, as well.

We continue to produce a very aggressive skimming strategy. For the last several weeks, we've been trying to flow additional skimming capability into all parts of the gulf. This is one of those types of capability, as the spill expands from Louisiana to the entire panhandle of Florida, we are looking at every possible opportunity to bring skimmer capability in there. And in the last two weeks, we've actually increased the skimming capability there by threefold, and we'll continue to pursue that as—as we move forward.

And with that, I'd be glad to take any questions you might have for me.

Q: Everyone’s watching the weather down in the Gulf, Admiral, can you tell us what kind of storm threat you got and who gets to make the call when the ships have to go in—if they do and how long does it take to get them back (inaudible)?

ADMIRAL ALLEN: Well, as you know, this has been an issue of ongoing discussion between BP, ourselves, all of our federal partners, DOD, and the state and local governments. We have a very robust hurricane contingency plan that has been produced by our incident commanders.

In general, our threshold to start taking action is 120 hours before gale-force winds are forecasted. That can be a different set of mileage, just depending on the track and the speed of the storm. But in general, at about 120 hours out of the onset of gale-force winds, we will start to redeploy the equipment from the well site, redeploy other equipment to safe venues, and then come in after the storm to re-establish production or to take part in rescue activities with the Coast Guard. We're also looking at continuity of operations plans at our incident command posts, how we'd evacuate our personnel, and so forth.

We’re also working very closely with DOD regarding air space coordination. This week, we are standing up an air space coordination function at Tyndall Air Force Base to help us manage the consistent amount of air traffic that's over the gulf region. Tyndall is also pre-designated as the node for rescue and coordination after a hurricane, so there's a natural synergy there between how we would manage the response to a hurricane while we're doing the response to the oil at the same time.

Also, there’s an extensive amount of work going on between the Coast Guard and FEMA. I’m working closely with Craig Fugate and Secretary Napolitano on our preparations of how we would co-mingle, if you will, the command structures of the national contingency plan for oil spill respond and Stafford Act response by FEMA.

Q: I didn’t actually hear though, who gets to make the call as to when the ships have to break and go and can you also give us the (inaudible)?

ADMIRAL ALLEN: I'm sorry, that would be the federal on-scene coordinator decision, as all of them are. But right now, the threshold for that decision nominally is the onset of gale-force winds in 120 hours, which is five days.

Male: And on survivability, can you translate that to the Simpson Scale on what it takes to get these ships to (inaudible)?

ADMIRAL ALLEN: Well, we're not even waiting, because you don't know—it could move into a 2, 3 or a 4 hurricane by the time it gets there. What we're looking at is gale-force winds, about 40 knots, onset of those, 120 hours in advance, storm moving that way, you start moving.

If you wait to get a clear delineation or the strength of the storm, you may be too late. And, again, the 120 hours is a time factor related to the onset of gale-force winds. Depending on the speed of the storm that could produce a different distance depending on how fast the storm is traveling.

Q: Admiral what's your assessment of if this does happen, if the storm does come into the area, your assessment of efforts on the containment and the clean-up of the Gulf?

ADMIRAL ALLEN: Well, obviously, it's going to be a very negative effect on it, because at some point we're going to have to break production and get those production units to a safer locale.

I would say, you know, overall goal in this whole thing is the safety of our personnel. And there are a lot of people on those rigs out there. And some of the rigs are easier deployable than others. For instance, the Q4000 is a lot easier to disconnect than the Discoverer Enterprise. This ranges anywhere from, I would say, 48 to 56 hours up to the whole 120 hours we might need, but it depends on the type of platform.

Q: There could be significantly vast more amounts of oil coming out?

ADMIRAL ALLEN: Well, once we disconnect, whatever the flow rate that we've estimated—as you know right now, it's between 35,000 and 60,000 barrels a day. Whatever that flow rate actually is—and we don't know that to a precise certainty—but that will be unattended.

Yes?

Q: Senator Nelson is calling for a ship surge if there is such a possibility that you would (inaudible) all this extra oil flow (inaudible). Any response to that or the assets around?

ADMIRAL ALLEN: Well, at the time we would break away is the time you need to be seeking shelter. And I understand the need to skim the oil as soon as we can, but it's going to be after the storm passes. I don't think anybody wants a vessel out there trying to skim oil with the weather building beyond gale-force winds.

So the goal would be to get to a safe quadrant of the hurricane, come in behind it, and as soon as we can that we have the ability to do that, to do that.

Q: Do you have a replacement cap in the works right now (inaudible)?

ADMIRAL ALLEN: That's a good question. We will be making a decision some time in the next seven days on whether the ships and the new containment cap and the new production system that I just briefed on, dependent on when a storm might appear, we could either be dealing with the current mooring configuration or the new one.

The new mooring configuration has greater flexibility and allows us to disconnect and reconnect quicker, but that won't be in place until around the middle of July. In the meantime, we're going to be faced with the reality that the Discoverer Enterprise, for example, is actually fixed to the wellhead through that riser pipe.

We're trying to go to what we're calling freestanding risers that are connected back to the well through flexible hoses and then to the production units on scene through flexible hoses, so it does make a difference on which production structure we have in place.

Q: (inaudible) have you taken any steps to keep them from bumping things again and pull them up (inaudible)

ADMIRAL ALLEN: Oh, they'll be recovered, as well, yes.

Q: And what steps…

ADMIRAL ALLEN: And I would say that we've had two incidents in the entire conduct of the entire operation, which is not a large amount. Both of them ended up being consequential in relation to exacerbating the oil flow. But there is a lot of oversight and technical supervision that goes in to the operation of those things simultaneously and there are a lot of them down there sometimes operating very closely.

Q: (inaudible) to change things?

ADMIRAL ALLEN: Well, I think the procedures in place are the ones that are followed by industry practice, but, again, these have been two exceptions to that. But as far as I know, they're following industry practice.

MODERATOR: Operator, at this time, we're prepared to take questions from the phone.

OPERATOR: Your next question is from Kristen Hays with Reuters.

Q: Hello, Admiral.

ADMIRAL ALLEN: Hello.

Q: I just wanted to check with you on what—if you just go over this one more time. Just how bad does the weather have to be to disconnect? You said on Wednesday that eight foot waves might—would mean the vessels need to move. And gale force winds, how fast is that?

ADMIRAL ALLEN: Yes, let me clarify that. Our normal operations out there, which means we're doing offshore supply vessels, skimming operations, in situ burning, just our normal operations, when you get to an eight-foot sea state, it starts to become very problematic for us to continue operations.

But the threshold for actually stopping production and redeploying is going to be when we encounter gale-force winds, which is winds 40 knots or greater, 120 hours out. OK?

OPERATOR: Your next question is from Vivian Kuo with CNN.

Q: Good afternoon, Admiral. I was just wondering, last week, you had said disconnecting from the Discoverer Enterprise would take approximately six to seven days. And being that the Q4000 is on flexible couplings, how long would it take for it to disconnect? That's my first question.

And my second question has to do with the ranging. Earlier you had said that you successfully detected the presence of the well. Have you now moved into the next stages of drilling downward at an angle for eventual intercept?

ADMIRAL ALLEN: We have. Let me take your second question first. They have made the first electromagnetic contact with the wellbore. What they have done now is they're going to drill down several hundred more feet and then take another reading, and these sequential readings allow them to slowly close the wellbore, so they have the first contact. They are now drilling several hundred more feet, and we would expect within the next day or two they would have the ability to make the second contact, and I'll report that as we—as we move along.

We have some more refined times in regards to the redeployment of these assets, because I went back and actually—to confirm that, because we were given rough estimates, in terms of days. What we need for the Discoverer Enterprise, time to secure and evade, and that including giving them at least 24 hours to make a transit out of the area right now is 114 hours for the Discoverer Enterprise and 54 hours for the Q4000. And that's an update and refinement of the earlier estimates.

Was that responsive?

Q: Yes.

ADMIRAL ALLEN: Next question?

OPERATOR: Your next question is from Bertha Coombs with CNBC.

Q: Admiral, thanks for taking my question. In terms of these contingency plans, where would these facilities go? And where would all of the personnel go? And how long would it take to get them back into place once a storm threat passed?

ADMIRAL ALLEN: Well, first of all, we would designate essential and non-essential personnel, and non-essential personnel would basically take shelter. Ideally, we would not do this at the same time they are trying to do an evacuation of citizens, so there's a staging of this, and we actually would coordinate that with FEMA and the local governments.

We are identifying continuity of operations where we could locate some of the background operations. Of course, we would continue to coordinate with the state and local governments and would be collocated with them and their emergency operations centers to make sure we maintain continuity of operations.

So the answer kind of varies depending on what you do, how essential your job is, how do we maintain the command-and-control communications, but most importantly, it's how we maintain connections with the local states and local governments.

So they're nuanced plans, and they're scalable, and they're rated based on what your function is, and at what point you might need to be evacuated. Is that responsive?

Q: It is. One more follow-up question. In terms of the drilling of the wellbore, if it stops at this stage, is there any danger in terms of a storm of basically setting you back on this and you'd have to start again or impeding the progress of getting closer to capping this well?

ADMIRAL ALLEN: We wouldn't have to start again, but we would definitely stop where we're at, and we would have to re-initiate it. And just—and I didn't talk about the relief wells.

For the Development Driller III, which is leading the first relief well, they would need 104 hours from the notification of onset of gale-force winds to be able to disconnect and then evade the storm, in other words, to make 24 hours progress to get away from it. That's included in these number of hours.

OPERATOR: Your next question is from Jim Polson with Bloomberg News.

Q: I'm sorry, Admiral. I'm still sort of going on this same track. These hours, for example, with the—the Discoverer Enterprise, 114 hours means 114 hours before they pull the cap and begin to move, or would it be earlier or later than that?

ADMIRAL ALLEN: What it would mean is, 114 hours in advance of the severe weather that's predicted to meet the threshold, they would disconnect.

Q: OK, thank you.

OPERATOR: Your next question is from Debbie Elliott with NPR.

Q: Admiral, thank you for taking my call. I'd like a little more information on the relief well apparatus and how—what the hurricane plan is for those and how you would restart that and what kind of a setback it would be, how many days it would be before you would begin again after a storm.

ADMIRAL ALLEN: Well, they have—they can disconnect right now from the wellhead in relation to both the drilling rigs, and they would move away and simply redeploy and re-initiate the drilling. There's a way they have to secure it. There is a riser pipe and a drill pipe. The riser pipe would have to be removed. They would have to secure the wellhead and hold it in place and then re-initiate the drilling when they return.

Was that responsive?

Q: Yes. How would they secure the wellhead?

ADMIRAL ALLEN: Well, I can give you a technical brief on it, but basically they have to hold the drill pipe in suspension of where it's at so they can reconnect to it, and they have a way where they actually close seals around it to hold the drill pipe. They basically stop and disconnect and then would come back and reconnect at a later date.

OPERATOR: Your next question is from Zach Warmbrodt with Argus Media.

Q: Hi, thanks. Could you update us on the status of the plan to attach a pipeline to the well? And I was also wondering if you could walk us through how that plan developed. Did that come from other companies other than BP and then BP got on board later?

ADMIRAL ALLEN: That's still being developed conceptually, and I think it has to do with the availability of the pipe. And the pipe, as I understand it, is specially treated pipe, because it has to be heated. This gets back to the issue, as you know, with the low temperature and the presence of gas and water together, the potential that hydrates are created.

That's still being scoped out by BP. It came about as a result of a meeting that was chaired by Secretary Salazar and Secretary Chu that included, among other folks, industry partners with BP and the American Petroleum Institute. And at that meeting, during some sidebars and informal conversation, I think it just came up that this could be an option and they're pursuing that right now.

They have not come back to us with any firm proposal yet. All we know is they are scoping it out, and we will advise you as soon as we learn something.

OPERATOR: Your next question is from Carol Rosenberg with the Miami Herald.

Q: Admiral, thanks for taking my call. Whatever came of the idea to have the Navy provide skimmers to this effort? And have you guys waived the Jones Act? And if so, where are the foreign vessels?

ADMIRAL ALLEN: Carol, at the outset of this event, we went to the Navy supervisor of salvage and asked for any oil skimming capability they had that they could give to us. The supervisor of salvage is the one that contains most of the Navy's skimming and booming response capability, and they worked with us on many of these large spill responses. And they, in effect, at that point, released all their strategic stockpiles of boom and skimming equipment to us.

The discussions we are having with the Navy and other folks right now is the availability of skimmers that are on standby because they might be needed for a spill someplace else and how we might go about assessing the availability of those resources. So I would separate out the resources that the Navy had that they've already given to us and the discussions we're having across the entire country where we have equipment that's out there as a requirement—legal requirement to cover spill response of those areas and how we might free those up, and that's a work in progress inside the administration right now.

And what was your second question, Carol? I missed it.

Q: Sir, about the Jones Act, has this been waived? And if so, where are the foreign vessels?

ADMIRAL ALLEN: Oh, there are a lot of foreign vessels operating offshore, Carol. The Jones Act—we have had no request for Jones Act waivers. If the vessels are operating outside state waters, which is three miles and beyond, they don't require a waiver. All that we require is an Affirmation of Reciprocity, so if there ever was a spill in those countries and we want to send skimming equipment, that we would be allowed to do that, as well, and that hasn't become an issue yet, either.

To the extent that there is a waiver required and they come to us, we're more than happy to support it in making that request to CBP. But to date, since they're operating outside three miles, no Jones Act waiver has been required.

OPERATOR: Your next question is from Susan Daker with Dow Jones Newswires.

Q: Hi, Admiral. Thanks for taking my question. With the forecast for the possible development of a tropical storm over the weekend —and tropical storms have about, I guess, wind speeds of about 40 knots —that would—with it entering the gulf on Monday or Tuesday, that means the whole operation could be halted next week, right?

ADMIRAL ALLEN: We'd be dependent on the conditions, as I said earlier. We would want to know when the forecasted winds would increase to a point where they were gale force, and then 120 hours in advance of that, we would want to move.

Q: So five days.

ADMIRAL ALLEN: This could be—this could be in advance of a declaration of what level of storm it was. Just in an abundance of caution, that would be our threshold to move. And, of course, we're watching that tropical depression very closely right now.

MODERATOR: Operator, we'll take two more questions.

OPERATOR: Your next question is from Denise Haywald with ClearWater Perspective.

Q: Yes, hi, Admiral. Thank you for taking my call. I have two quick questions for you. One, I have been hearing that there is a methane -- another methane gas bubble very close to the proximity of the initial one that caused the explosion. That's my first question, if you know of any information on that, if you can confirm or deny that.

And then, also, can you tell us a little bit more about the floating device—the floating riser package? And why would you not be trying to get that installed now before the really active part of the hurricane season?

ADMIRAL ALLEN: First of all, I'm not aware of any methane bubble. That doesn't mean that it might not have happened in the few minutes that it took me to come here for the conference, but we will follow up and make a statement if anything like that has occurred.

Regarding the vertical risers, one of the things we're trying to do to increase production is bringing some methods to produce oil into the gulf that they don't normally use. Most of the oil that's produced in the gulf is produced by the drilling rigs and is actually piped to shore. And as you also know, we have the Louisiana offshore oil port, and all these—there's a huge network of underground pipes that is used to transport oil in the Gulf of Mexico.

Because of that, the notion of having a production—floating production vessel on the surface that would transfer to a shuttle tanker is not a normal means of production in Mexico—I mean, in the Gulf of Mexico.

So what we've had to do is we had to go around the world and bring in the equipment, the type of flexible hoses that you need and the mooring systems to be able to create that. The shuttle tankers that actually are involved in this type of production are common in the North Sea, some places in the Mediterranean off South America. And, in fact, they're actually coming this way. the Loch Rannoch, which is the large shuttle tanker we're going to use for the first vertical riser package, just arrived in the area this week from the North Sea, and several others are en route.

The ultimate goal is to take the existing cap on the well, replace it with a new cap, and exploit four ways to produce oil through vertical riser packages. Now, each vertical riser package is a free-floating riser that's vertically suspended. It's about 4,000 feet. It's anchored to the seabed and floats just below the surface.

That then is connected back to the wellhead through flexible hoses at the bottom and through flexible hoses to the production platform at the top. The production platform cannot store a lot of oil, so there has to be paired with a shuttle tanker that is capable of dynamic positioning, which means it can station, keep right next to it without having a lot of risk being introduced if the vessels might collide or anything like that.

What's going to make all this work is replacing the current containment cap with a bolted-on different type of a cap that will allow us to use the choke and the kill lines through (inaudible), and then two more pipes coming out of the containment cap, which will go to two other vertical riser packages to production platforms. That's where you get four production platforms that takes you to the 60,000 to 80,000 barrels per day.

Was that responsive?

Q: Yes, it was. Just for clarification purposes, you're saying that it could contain up to 60,000 to 80,000, but right now the estimate is it's 35,000 to 60,000 barrels a day. So how's that possible?

ADMIRAL ALLEN: That'll give us that capacity. What we're trying to do is have capacity to produce out there that exceeds the current flow rate estimate so there would be no oil leaking. That's the reason, when the president made the statement, we wanted to at least contain 90 percent of this oil in the near future. What that means is putting a new containment cap on and create the ability through the four vertical riser packages to produce more oil than we think the flow rate is and get us ahead of the game here.

And that does a couple of things. It gives us excess capacity and redundancy, so if we have a system go down, and we've seen the Discoverer Enterprise go down several times, either to mechanical, lightning strikes, or things like that, that we could continue to operate among the four of them and mitigate our risk not only in terms of the capacity of the oil we're producing, but the redundancies of the system so we could continue to operate.

MODERATOR: Operator, we'll take a final question.

OPERATOR: Your final question is from Tim Dickinson with Rolling Stone magazine.

Q: Thank you for taking my call. And I guess this leads right into my question. What has been the limiting factor right now? Has it been the capacity of the Discoverer Enterprise or the building of this new four-pronged new cap? I'm just sort of—we've been waiting for a long time for these ships. I'm just trying to understand whether it's the lack of the ships or the—the building of this containment cap that's been the limiting factor so far.

ADMIRAL ALLEN: It's actually a combination of both. If you can imagine, we have a pipe of a set diameter, and there's product coming up through that. There are three ways to take oil out of that. One is through the riser pipe, and the other one is through the kill and the choke line. Those are the pipes that go down. We actually used them during the top kill to actually pour some mud down the wellbore.

We've got the Discoverer Enterprise producing from the riser pipe by putting the fitting over where the riser pipe was cut and running another riser pipe up to the Discoverer Enterprise. We have taken the choke line and have run that to the Q4000.

All this has (inaudible) manifolds and fittings and couplings and control systems that did not exist before the event at the well. To be able to go beyond the riser pipe and the kill and the choke line, which gets us to 53,000 barrels, we're going to have to come up with a new containment cap and go to a production system that's not—did not formally exist in the Gulf of Mexico. Then that requires you to bring the vessels in from out of the hemisphere, basically.

So you're right. It's a combination of both the points you raised. It's pretty technical.

ADMIRAL ALLEN: I think, realistically, over an abundance of caution, with the 114, 120 days, and then time to come back on station and waiting for the hurricane pass, I think (inaudible) looking at a window of 14 days. I think that's generally the planning factor that we're looking at.

Male: (inaudible)

ADMIRAL ALLEN: That's a good question. There are actually three different containment caps being considered. We're going to be in a meeting in Washington next week and bring in the best science minds we've got inside the government and outside the government.

That'll be a meeting that will be hosted by Secretary Salazar and Secretary Chu, and we're going to talk about that decision point, how we make it.

Obviously, we're going to unbolt at some point that stub of the riser pipe and try and bolt a new system on as a flange there. We do have some options where we could leave that in place and put a better system around it. And if you look at the three—and I can go into more detail maybe in a subsequent briefing. That might be good.

There are three different containment options, one of which is actually remove it and bolt a new one on, or how would you go around and encase it better than the system we've got right now? And they range in size from one or two tons to 20 tons as far as how big they are.

And so what we're looking at is the technical issues associated with removing the riser pipe and have an unimpeded flow at that point until you get the new cap on versus the -- what you're able to gain from and able to go to four production platforms.

And the other thing we're looking at, too, if we know we're going to put one of these cap devices on, in the past, we wanted to know what the pressure readings were in there, because it helps us understand the flow rate. We think there's an opportunity to actually have them build sensors into those containment caps and get the information we need as part of the recovery.

When they gave us the proposal to increase the capacity and improve the redundancy, we went back and actually sent them another letter saying, You need to give us the technical drawings for all three devices, because we want to sit down and have a conversation on how you can put remote sensors in there so we can get good information and have empirical data on the flow rate.

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